Friday, December 2, 2011

Crazy Ideas and Vested Interests

Simon Johnson criticizes the notion that the European Central Bank could make a massive loan to the International Monetary Fund, which would then turn around and lend to countries like Italy. “This is a bizarre notion” he writes.

Instead, “the ECB should provide financial support directly to Italy, if that is the goal.

But that goal increasingly seems both to be the only idea of officials and the last failed notion of a fading era. More bailouts and the reinforcement of moral hazard – protecting bankers and other creditors against the downside of their mistakes – is the last thing that the world’s financial system needs.”

The whole post (about Too Big to Fail banks ad how to cope with them) is well worth reading, here.

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About Me

As a professor of economics, my main specialization fields are in the theory and strategy of the firm, and the theory and applications of public choice (political economy).
I also do consulting work in these fields.
For more information on my work go to my homepage: http://jeanjacques.rosa.pagesperso-orange.fr/
and my SSRN author page: http://ssrn.com/author=471576.
My e-mail has changed: jj.rosa@orange.fr